Superannuation Legislation Update - 20 October 2022

Treasury Laws Amendment (2022 Measures No. 2) Bill 2022

Among other provisions, this Bill (Schedule 5) reduces the minimum age from which ‘Downsizer Contributions’ can be made from 60 to 55 by amending s292-102(1)(a) of the ITAA97. Changes in SIS Regulation 7.04 regarding contributions acceptance rules will be made by Regulation. Regulation made 29 September 2022 (see below).

The amended provisions of the Bill commence on the first day of the first quarter after the day the Bill receives Royal Assent.

The Bill was Read for the 3^rd time on 26 September 2022 and sent to the Senate.

Social Services and Other Legislation Amendment (Lifting the Income Limit for the Commonwealth Seniors Health Card) Bill 2022

This Bill amends the Social Security Act 1991 and the Veterans’ Entitlements Act 1986 to increase the Commonwealth Seniors Health Card income test limits to $90,000 a year for a single person (from $57,761) and $144,000 a year for couples (combined) (from $92,416).

If passed, these new thresholds will apply from 7 days after this Bill receives Royal Assent. These new thresholds will be again indexed on 20 September 2023 and annually, on 20^th September, thereafter.

20 September 2022 (if passed). That date now having passed, the Bill has now been amended to substitute “20 September 2022” to “the day this item commences”.

Amendments proposed by Opposition: Committee of the Whole Debate 28 September 2022. Amendments (7 Government, 10 Opposition) agreed to. Third Reading agreed to. To HoR for consideration of Senate amendments made.

Social Services and Other Legislation Amendment (Incentivising Pensioners to Downsize) Bill 2022

Eligible income support recipients (including Age Pension recipients) realise a sum of money via the sale of their principal place of residence that would adversely affect, via the deeming rate of 2.25% of assets over a certain threshold, any Age Pension (and other Commonwealth Income Support sources) they receive.

There is currently a 12 month window where a new principal residence can be bought and, during that period, a deeming rate of 0.25% will apply to those assets.

This Bill/Act proposes to extend that 12 months to 24 months (with a further 12 month extension available under certain circumstances).

Introduced into HoR 7 September 2022.

Third Reading agreed to 28 September 2022 (after Federation Chamber’s Second Reading).

Was sent to the Senate for concurrence when the Senate next sits but has now (28 September 2022) been referred to the Senate Community Affairs Legislation Committee for response by 20 October 2022.

Financial Accountability Regime Bill 2022

The Financial Accountability Regime Bill 2022 introduces a new accountability regime for the banking, insurance and superannuation industries.

Schedules 1 and 2 to the Financial Sector Reform Bill 2022 make consequential amendments to relevant Acts to support the Financial Accountability Regime.

The Bill commences on Royal Assent. For superannuation, the regime commencement date is 18 months after the commencement of the FAR Bill.

AIST made a submission on 12 August last year in response to Consultation and on 22 December 2021 re the Financial Accountability Regime and will analyse these again-introduced (and perhaps revised) Bills.

Introduced into HoR 8 September 2022.

The FAR Bill, FSR Bill and the CSLR Bills were debated (via Cognate Debate) in the HoR on 28th September and, the Third Reading having been agreed to, passed to the Senate whereupon it has now been referred to the Senate Economics Legislation Committee for response by 20 October 2022.

Financial Services Compensation Scheme of Last Resort Levy Bill 2022

The CSLR is intended to support confidence in the financial system’s external dispute resolution framework.

The scheme will provide compensation where a determination issued by AFCA remains unpaid and the determination relates to a financial product or service within the scope of the scheme.

The Commonwealth will fund the establishment of the scheme and its operation in the first year. A levy will be imposed on the financial services industry to fund the scheme in future years.

The establishment of the scheme and the supporting levy framework commences on the day after Royal Assent.

The operator of the scheme can begin to make compensation payments under the scheme from 1 July 2023.

Introduced into HoR 8 September 2022

The FAR Bill, FSR Bill and the CSLR Bills were debated (via Cognate Debate) in the HoR on 28th September and, the Third Reading having been agreed to, passed to the Senate whereupon it has now been referred to the Senate Economics Legislation Committee for response by 20 October 2022.

Financial Services Compensation Scheme of Last Resort Levy (Collection) Bill 2022

As above.

The CSLR Bills were introduced in October last year but were prorogued on 11 April 2022 with the declaration of the election.

AIST made a submission last year re the CSLR and will analyse these again-introduced (and perhaps revised) Bills.

Introduced into HoR 8 September 2022

The FAR Bill, FSR Bill and the CSLR Bills were debated (via Cognate Debate) in the HoR on 28th September and, the Third Reading having been agreed to, passed to the Senate whereupon it has now been referred to the Senate Economics Legislation Committee for response by 20 October 2022.

Financial Sector Reform Bill 2022

This Bill deals with consequential amendments to various Acts and transitional matters arising from the enactment of the Financial Accountability Regime Act 2022 and to establish the financial services compensation scheme of last resort (CSLR).

Introduced into HoR 8 September 2022

The FAR Bill, FSR Bill and the CSLR Bills were debated (via Cognate Debate) in the HoR on 28th September and, the Third Reading having been agreed to passed to the Senate whereupon it has now been referred to the Senate Economics Legislation Committee for response by 20 October 2022.

Treasury Laws Amendment (2022 Measures No. 3) Bill 2022

Schedule 5 to the Bill amends the SIS Act to provide for an alternative annual performance test for faith-based products. APRA may determine that a product is a faith-based product if a trustee for the product provides APRA with a valid application.

This Schedule will take effect on the day of the Bill’s Royal Assent.

AIST made a submission re: the draft legislation, on 23 August 2022.

This Bill has now been referred to the Senate Economics Legislation Committee for response by 17 November 2022 although the Bill remains in the House of Representatives.

Amendments to remove the Faith-based exception from the Bill and add AMM Notice requirements have been proposed by Mr Stuart Robert MP.

Superannuation Industry (Supervision) Amendment (Annual Members’ Meetings Notices) Regulations 2022

Regulation amends the requirements, in the SIS Regulations (particularly r2.10), relating to the content of Annual Member Meeting Notices. The key changes from the original regulations are:

• The one page short form summary no longer must be the only information on the page, allowing funds to provide some explanations to accompany the short form summary, however it is not intended to allow promotional material or information that will detract from the aggregated expenditure information

• Only aggregate expenses in each category must be disclosed, not line-by-line expenses

• The definition of related party now aligns with accounting standards (AASB 124 Related Party Disclosures)

• Political donations (i.e. ‘gifts’) will need to be itemised as the section they are contained within (r2.10(1)(f)) has not been repealed.

In-Force. Amending Regulations registered 1 September 2022

9 September 2022

On 6 September, Senator David Pocock (Independent, ACT) issued his intention to disallow this Regulation under Section 42 of the Legislation Act 2003. As at 26 September 2022, this Motion to Disallow was postponed until 25 October 2022. AIST will continue to keep funds apprised of the progress of this issue.

On 28 September 2022, an updated version of the SIS Regulations – incorporating these AMM Amendments – was issued.

Amendments to the Telecommunications Regulations 2021

Amendments to the Telecommunications Regulations 2021 have been made via the Telecommunications Amendment (Disclosure of Information for the Purpose of Cyber Security) Regulations 2022.

The amendments enable telecommunications companies to temporarily share approved government identifier information (such as drivers licence, Medicare and passport numbers of affected customers) with regulated financial services entities to allow them to implement enhanced monitoring and safeguards for customers affected by the data breach.

In addition, Optus will be able to share identifiers to assist Commonwealth, and state and territory agencies, to detect and assist in preventing fraud.

In-Force. Amending Regulations registered 11 October 2022.

12 October 2022

Superannuation Guarantee (Administration) Amendment (Aged Care Registered Nurses’ Payment) Regulations 2022

These regulations exempt from the calculation and payment of SG, payments paid to an employee under the Aged Care Registered Nurses’ Payment to reward clinical skills and leadership (the Grant). The Regulations achieve this by exempting payments made to an employee under the Grant from being included in the “salary or wages” that are used to calculate an employer’s superannuation guarantee charge.

In-Force. Amending Regulations registered 17 October 2022

Instrument has effect 18 October 2022 in relation to any Grant amount paid on or after 1 November 2022

Financial Sector (Collection of Data) (reporting standard) determination Nos. 18 & 19 & 20 of 2022

These determinations remove a number of Data Standard items (SRS 250.0, SRS 533.1 and SRS 703.0).as they are now redundant as a result of the data required by the Superannuation Data Transformation (SDT) project.

After a period of parallel reporting to ensure the quality of the data submitted under the New Reporting Standards is sufficient, APRA has determined that collection of information under the three reporting standards listed above is no longer required.

The instruments commence on 28 October 2022.

Consultation (Treasury)

Quality of Advice Review

Consistent with recommendations 2.3, 2.5 and 2.6 of the Final Report of the Hayne Royal Commission, the Government is commissioning this Review which will consider how the regulatory framework could better enable the provision of high quality, accessible and affordable financial advice for retail clients.

The Review (‘QAR’) will not make recommendations on:

• professional standards for financial advisers
• Royal Commission Recommendations 2.7 to 2.10
• changes to the definitions of ‘retail client’, ‘wholesale client’, and ‘sophisticated investor’
• financial services redress arrangements or
• the application of taxation and privacy laws to financial advice

Released 11 March 2022.

A report will be provided to the Government by 16 December 2022.

AIST has provided a submission for this consultation.

Consultation (Treasury)

Quality of Advice Review – Proposals Paper

A Proposals Paper, for consultation, as a part of the Quality of Advice Review, was issued on 29 August 2022. Among other proposals, Review Lead, Michelle Levy proposed:

• that the current ‘Best Interests’ and other financial advice duties were to be consolidated into the provision of ‘good advice’,
• that a number of consumer protections were to be removed and
• that annual fees disclosures for ongoing financial advice would no longer be required.

The Consultation Paper – Proposals for Reform was issued on 29 August 2022, for comments and further submissions. This Consultation will close on 23 September 2022.

As 23 September 2022 was a Public Holiday in Victoria, AIST was permitted to provide a submission for this consultation on 26 September 2022.

Consultation (APRA)

Proposed prudential standard designed to strengthen the management of operational risk

APRA has released for consultation a new prudential standard designed to strengthen the management of operational risk in the banking, insurance and superannuation industries.

APRA proposes to introduce a new cross-industry Prudential Standard CPS 230 Operational Risk Management (CPS 230) which will set out minimum standards for managing operational risk, including updated requirements for business continuity and service provider management.

The proposed Prudential Standard CPS 230 Operational Risk Management (CPS 230) is attached to the Consultation materials.

Consultation opened 28 July. Submissions will be accepted until 21 October 2022.

Discussion paper (APRA)

Strategic planning and member outcomes: Proposed enhancements

Recognising that SPS 515 is relatively new and RSE licensee practices continue to mature, APRA is now seeking to move beyond the ‘documentation-focus’ of the implementation period – where supervisory engagement focused on the business plan, the member outcomes assessment and the business performance review, to one where member outcomes considerations are embedded and integrated across an RSE licensee’s business operations.

Recent benchmarking of RSE licensee implementation of SPS 515 has made clear there remain opportunities for improvement and enhancement. This discussion paper reflects APRA’s view on how SPS 515 and associated guidance must evolve and seeks input from the superannuation industry in pursuit of the common goal of delivering better outcomes to all members.

In undertaking this review of SPS 515, APRA’s approach is informed by plans to modernise the prudential architecture to deliver a simplified and more cohesive framework that provides RSE licensees clarity on their obligations and flexibility to meet them. APRA’s objective is that the superannuation prudential framework, anchored by revised SPS 515, will be more integrated, have a greater focus on outcomes and be easier to understand and navigate. This discussion paper also describes how connected reforms will be pursued consistent with this objective of a simple and forward-looking framework.

Consultation opened on 1 August 2022 and will close on 11 November 2022.

Information provided in response to this paper will inform revisions to SPS 515 and associated guidance, with consultation on the draft standard and guidance expected to commence in 2023.

AIST will make a submission in relation to this discussion paper.

Consultation (Attorney-General)

Review of Australia’s Modern Slavery Act 2018

The Australian Government is undertaking a statutory review of the Act’s operation and compliance over the first three years since commencement.

The A-G’s office is interested to know whether additional measures are necessary to improve the Act’s operation and compliance in the Australian context.

The review commenced on 31 March 2022 and is to be completed within one year, followed by a report to be tabled in Parliament. Professor John McMillan, AO, is leading the review, supported by the Attorney-General’s Department.

The reporting obligations of the Modern Slavery Act apply to entities, including superannuation entities, with a consolidated annual revenue of at least AU$100 million over its twelve month reporting period.

Consultation closes 22 November 2022 (and opened 22 August 2022).

Consultation (APRA)

Strengthening Crisis Preparedness

On 6 September 2022, APRA released for consultation draft guidance on financial contingency and resolution planning. The objectives of the guidance re: the proposed new prudential standards: CPS 190 Financial Contingency Planning and CPS 900 Resolution Planning are set out below:

• CPG 190 is intended to assist entities in meeting the key requirements of the proposed new prudential standard. It provides further explanation of the outcomes that APRA expects, so that entities can meet these expectations through their actions. It is principles-based, rather than prescriptive, and includes examples of better practice.

• CPG 900 sets out a framework for how APRA expects to engage with entities in developing and implementing a resolution plan. The proposed draft guidance explains what is expected of entities in the resolution planning process and sets out the factors that APRA will have regard to in developing resolution plans for individual entities.

• The detailed Consultation description is linked here.

• The 6 September APRA letter to Trustees is linked here.

Consultation will close 6 December 2022 (and opened 6 September 2022).

AIST made a submission re: Strengthening crisis preparedness on 10 May 2022.

APRA is planning to finalise CPS 190 later this year and CPS 900 in the first half of 2023.

Review Consultation (Treasury)

ASIC Industry Funding Model Review

The Review is being led by Treasury, in consultation with ASIC, the Department of Finance (Finance)

and the Department of the Prime Minister and Cabinet (PM&C).

On 8 August 2022, the Government announced a review of the Australian Securities and Investments Commission (ASIC) Industry Funding Model (IFM) and issued a Terms of Reference to guide the Review.

The Government has released a Discussion Paper to seek stakeholder views on options, examples of potential changes and questions that are designed to examine and address a range of issues set out in the Review’s Terms of Reference.

Stakeholder feedback received through this process will inform the Review’s consideration, including to consider whether any refinements are required to the IFM to ensure its settings remain appropriate.

Consultation will close 28 October 2022 (and opened 28 September 2022).

Australian Law Reform Commission (ALRC) - Financial Services Legislation: Interim Report B (ALRC Report 139)

See Other Materials, below. The ALRC is seeking written submissions from stakeholders. Submissions, together with further consultations, surveys, workshops, and seminars, will form part of the evidence base for a further Interim Report and the Final Report.

Submissions close 30 November 2022.

Consultation (Treasury)

Superannuation Auditor Registration Imposition Regulations 2022

The Government is consulting on the Superannuation Auditor Registration Imposition Regulations 2022 (the Regulations) which remake and improve the operation of the Superannuation Auditor Registration Imposition Regulations 2012 (2012 Regulations). The 2012 Regulations are due to ‘sunset’ on 1 April 2023.

The Regulations remake and improve the 2012 Regulations by updating the amounts of the fees and updating the language about the method of indexation. These changes do not affect the substantive meaning or operation of the provisions but allow for greater ease of understanding. The Regulations broadly follow the structure and numbering of the 2012 Regulations.

Consultation closes 20 November 2022 (and opened 13 October 2022).

Australian Law Reform Commission - Financial Services Legislation: Interim Report B (ALRC Report 139)

See Consultations, above. Interim Report B contains recommendations, proposals, and questions in relation to the reform of corporations and financial services legislation.

The recommendations in Interim Report B relate to technical improvements that would simplify corporations and financial services legislation. The recommendations are in a form that may be implemented prior to the conclusion of the Inquiry, if accepted by the Australian Government.

Interim Report B was tabled on 30 September 2022.

Interim Report A was issued on 30 November 2021. The recommendations in Interim Report A resulted in the issue of Draft Legislation (and an Explanatory Memorandum) and Regulations (and Explanatory Statement).The Consultation was titled “Improving Corporations and Financial Services Law”. Consultation closed re these draft materials on 20 September 2022. No submissions to this Consultation are available.

The third interim report will focus on the potential reframing or restricting of Chapter 7 of the Corporations Act. This will involve identifying ways of making Chapter 7 clearer, more-coherent and more-effective.